Is Amazon Misleading Indie Publishers on VAT Pricing?

Is Amazon’s Kindle pricing system misleading indie publishers? Like many small publishers, I read with some confusion the various emails about Amazon’s changing approach to VAT or Value Added Tax in the European Union and Japan. But did you know they charge VAT in Australia, also? You would not if you only go by what Kindle’s pricing page tells you.

When you go to the Kindle page, it now tells you what the price is including VAT (and helpfully converts your US price to a VAT-inclusive price in the EU and Japan), but if you are not really paying attention, you may not realize that you will be underpricing your book if you accept Kindle’s prices. You are also paying the tax for the buyer!

At today’s rates, a $6.99 book in the US should sell for €6.59 before VAT. As every country has a different VAT rate, you need to calculate each VAT-inclusive price and you’ll know you are right when Amazon calculates the price without VAT as €6.59.

In truth, Amazon’s pricing system is working backwards and appears to be intentionally leading you to underprice your books. If the system were really trying to be useful and accurate, it would ask you to set a price for all VAT countries VAT-exclusive, and would then calculate the price including VAT and that would be the price on your book in those countries that have VAT. And, honestly, it would be an actual service to publishers if it worked correctly, rather than trying to mislead publishers to have lower—and profit-cutting—prices.

Again, if you do not do your own VAT-inclusive pricing, you are paying the tax for the buyer. By calculating the VAT-inclusive tax off the US price, the net price calculated by Amazon for your book will be less than the US price converted into the foreign currency, since Amazon is taking your VAT-exclusive US price and turning it into a VAT-inclusive price in the EU and Japan.

As for Australia, Amazon doesn’t even tell you that the price you are setting is VAT-inclusive, but if you look at any of your books on Amazon.com.au, you will see that it states “includes tax, if applicable.” Well, there is a VAT on eBooks in Australia and it’s 10%. In New Zealand, it is 15%. See http://www.internationalpublishers.org/images/VAT2015.pdf. So you need to add 10% to your listed price in Australia and 15% to New Zealand (though Amazon does not offer separate NZ prices, other online retailers do).

So, as the saying goes, if you want it done right, do it yourself. Don’t let Amazon automatically set the VAT-inclusive price or you will be paying the taxes for your buyers.

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